Compare the relative risks of the two companies

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Company M has sales of 200,000 units at $2 per unit, variable operating costs of $1.70 per unit, and fixed operating costs of $6,000.Interst is $10,000 per year. Company N has sales of 200,000 units at $2.5 per unit, variable operating costs of $1 per unit, and fixed operating costs of $62,500. Interest is $17,500 per year. Assume that both companies are in the 40% tax bracket.

Question 1: Compute the operating breakeven point ( units& dollars) for Company M and N

Question 2:  Compute the degree of operating leverage for Company M and N

Question 3:  Compute the degree of financial leverage for Company M and N

Question 4:  Compute the total leverage for Company M and N

Question 5: Compare the relative risks of the two companies

Reference no: EM132488394

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